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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (46105)	1/6/2012 10:31:06 AM
From: E_K_S	2 Recommendations Respond to of 78666

Other forms of Value, holding more cash is just one of them . . . In looking at the Value picture (for me), there are other types of value holdings that I have been moving to other than just the fundamental forms found in equities. For one, I too have been moving more to cash seeking safety and "value" (even w/ it's negative return) at my local Credit Union (0.75 annual return), holding preferred shares (MHRpC plans to call this paper w/i 90 days; my No. 3 holding) and moving 15% of my portfolio assets into (hopefully undervalued) income producing real estate late last year. One of my Dad's investment thesis (in his later life) was investing to maintain his current purchasing power. His goal was to own companies (or assets) that maintain their "value" in inflationary and/or deflationary environments. The problem with an all stock equity portfolio, values can drop substantially (unless holding a large % of cash) in a very short amount of time. We saw this in 2009 and we will see that again. In fact, the way the trader talk over at the Big Dog's Boom Boom Room selling naked Puts that carry huge downside risk is just a hint how investors are viewing the potential downside to this market. There is a reason Mr. Market is pricing Puts w/ such huge premiums six months out. In a normal environment, one could try to hedge a portfolio to protect significant downside risks. One would do this by owning Puts, holding more bond like equities (utilities, preferred stock, financials), equities that have little or no LT debt and/or hold assets that generates large amounts of current cash flows (including income producing real estate). The most oblivious of these are oil companies. Your Newmont Mining (NEM) pick also fits in this category too. Portfolio Management -------------------------------- My current portfolio management has been to sell most (if not all) of my stock lots that include my (1) high priced buys, (2) buys at or near above my cost basis and (3) holding the proceeds in cash (or cash like funds). All my new buys must follow very conservative guidelines: little to no LT debt exposure, low PE (10 or less), have a (tangible is best) BV of 1.5 or lower and must pay a dividend generated from high current cash flows. The Graham No. is an easy way to do a quick screen that produces stock candidates that meet these "value" constraints. The developing Big "Value" Opportunity: --------------------------------------------------------- As a conservative value investor, I am setting the table to take advantage of another buying opportunity IF a 25% market correction/crash occurs. Therefore, (for me) accumulating a large position in cash, trimming my marginally profitable equity positions and staying out of new equity opportunities unless they meet some very tight value criteria. My goal is to maintain my current purchasing power which could be much lower if we see a 25% market correction. At the same time, I need to generate enough current income to support day to day living (paying bills & taxes; property, State & Federal, and cover huge medical insurance premiums). Our 2012 health insurance premiums are up another 10% making the total payments more than our monthly mortgage payment. These monthly health insurance premiums now amount to more than 10% of my after tax annual income... and our family is healthy w/o any pre-existing conditions. My only disadvantage is I am self employed (an investor) w/o any Gov and/or business health plan subside. If the possible buying opportunity develops, I should be able to buy more new assets at 50 cents of today's value so I can resell them in 3-5 years for 90 cents of today's value. Perhaps the best values could be picked up in the small cap area but I bet that many of the larger caps will be on sale too that could provide similar values but w/ less much risk. So, holding more cash now could be one of the best current "value" plays for many of the reasons I explained above. At least (for now) that is my current thinking. *I am at 5x my current cash position from late last year (now around 25%) and will continue to trim to as much as 50% cash where opportunities exist.* EKS

To: Paul Senior who wrote (46105)	3/20/2012 12:14:50 AM
From: Spekulatius	Read Replies (3) \| Respond to of 78666

re NEM (53$), ABX ( 43.6$) - these gold producers start to look like decent value with strong balance sheets and PE's less than 10x. Any preferences regards either ABX or NEM? I think NEM has a better LT track record but it seems like ABX is slightly lower production cost/oz. (ABX ~500$/oz, NEM, 560$/oz). I am thinking of starting a first round of buys at current prices or a bit below. I think they may also serve as a portfolio hedge, and while gold will not respond if I fondle it, these stocks pay dividends. Thoughts welcome....